Government reassures voluntary sector about anti-avoidance

Published on 28 July 2004

At LITRG’s behest, the Government has reassured voluntary sector advisers that giving routine pro bono tax help to individuals will not bring them within the new rules that require promoters and users of tax avoidance schemes to register with the Inland Revenue

Under this year’s Finance Bill and associated regulations, promoters and certain users of tax avoidance schemes are required to register with the Inland Revenue and provide them with certain information about the schemes.

The purpose of the legislation is to give the Revenue advance notice of new tax avoidance schemes, so that they can act to curtail tax loss resulting from their marketing and use. However, like all anti-avoidance laws, these were widely drafted, and could be interpreted to include advisers who do no more than give perfectly legal tax planning advice to individuals to mitigate their liability.

In particular, LITRG felt that the rules might include the growing number of charitable organisations which offer tax or tax credit advice to people on low incomes on a pro bono basis. We were concerned that if not specifically excluded, the rules might even embrace simple advice designed to structure an individual’s or couple’s tax position to the best advantage, within the law.

For instance, an elderly couple might be advised to split their married couple’s allowance between them where the man has insufficient income to absorb it. Or people might seek advice on how to arrange their limited savings so as to benefit from the most favourable tax treatment of the interest.

We therefore asked for a specific exclusion in the primary legislation, or failing that an assurance from Government that the voluntary sector would be excluded from the scope of the regulations.

The Government’s response

The Government have now issued a summary of the responses to their consultation. In it, they say (at paragraph 15):

‘Some responses sought an exclusion of specific types of business, including building societies, charitable organisations and insurance companies from the disclosure rules. Others sought an extension of the exclusions for companies in a group to joint venture companies, dual listed companies and Limited Liability Partnerships.
‘The Government was not convinced of any argument for excluding specific businesses from the disclosure rules, nor of the case for extending the current exclusion for groups to other entities. We are aware of concerns that charities such as the Citizens Advice Bureau that provide advice on tax matters to people on low incomes might be subject to reporting requirements under the disclosure rules. But there is no question that the sort of routine advice provided by such organisations would fall within the rules.’

 

This should provide some comfort to advisers acting pro bono that they can safely continue to give routine advice to low-income clients about arranging their affairs, legally, in such a way as will reduce their tax liability.

For LITRG’s comments on the draft regulations, click on Reports then Submissions. For the Government’s response to the consultation, follow the link below.

(28-07-2004)

Contact Name: Robin Williamson (Contact tel: 0844 579 6700, Fax: 0844 579 6701)

Relevant Link: Government response to the consultation